Forex market is the biggest market in the world whereby currency pairs are traded over the counter. Unlike in the stock market, there is no centralized exchange for the processing of transactions. The fact that forex traders trade with each other, gives rise to a 24-hour market operating five days a week.
Volatility is the key driver of the forex market. When it comes to placing trades, forex traders look for times of the day when volatility is high. When volatility is high, transactions costs in the form of spreads tend to below, which allows traders to generate optimum returns per trades placed.
The Best time to trade the forex market
The best time to trade, the forex market is when volatility is high. Volatility tends to be high when the biggest markets in the world are open. Out of the major financial centers in the world, New York, London, Tokyo and Sydney are considered the epicenter of the forex market.
Whenever these markets are opened, volatility in the forex market tends to be high given the market moving news release that accompany these sessions.
- Tokyo between 7PM – 4AM EST
- New York between 8AM – 5PM EST
- London between 2AM – 12PM EST
However, it is essential to note that not all markets offer the best forex trading opportunities. The London session tends to be the most active with the highest number of forex trading opportunities. When the London financial market is opened, the forex market tends to experience high levels of volatility given the number of international banks with operations in the city.
Liquidity and volatility tend to increase when the London session is opened heading into the opening of the New York session. When the two markets are opened liquidity tends to be high, which makes it easy to open and close trades at reduced transaction costs. Forex scalpers find the New York-London overlap to be the best time to trade the forex market given the high price movements experienced during this time.
the best times to trade for individual currency pairs
- US – European Overlap: 8AM – 12PM EST
- European – Asian Overlap: 2AM – 4AM EST
Liquidity and volatility tend to increase when the London session is opened heading into the opening of the New York session. When the two markets are opened liquidity tends to be high, which makes it easy to open and close trades at reduced transaction costs. Forex scalpers find the New York-London overlap to be the best time to trade the forex market given the high price movements experienced during this time.Likewise, the best time to trade the forex market is between 1:00 pm GMT and 5:00 PM GMT for forex traders in the UK. These trading hours tend to come with high liquidity levels, given the overlap between the London and New York market trading time.
The Best Day To Trade Forex Market
The fact that day traders close their trades by the end of each day trading, it is also important to select the best day to trade the forex market. Forex traders benefit the most on trading the forex market during the most active days.
The best day to trade the forex market is when there are big events in the form of a news release by Central banks of the big economies in the world. Tuesday, Wednesday and Thursday are some of the best days to trade the forex markets given the important releases that occasion these trading days.
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